Legal education in the United States needs to change.

Indiana University Maurer School of Law Professor William Henderson makes that statement in the first line of his recently published research paper, “A Blueprint for Change,” which also offers a plan to transform legal education to better fit the changing legal marketplace.

Henderson argues that the legal market is no different than any other market in that it is subject to the laws of supply and demand. Right now, supply is vastly outstripping demand.

The law professor paints a grim picture of the current state of legal employment. For the class of 2011, Henderson notes that nine months after graduation only 55 percent had found full-time, long-term work requiring bar passage. Others found work for which having a law degree was an asset, but for a significant number bar passage and a J.D. offered no advantage (or salary boost). Couple this with increases in student debt – which is now on average approaching six figures for many graduates – and you have the makings of a crisis.

These statistics follow several years of downward trends in the legal job market. Henderson said his own interest in the economic aspects of the legal world began when he was in law school, as he saw many of his classmates making decisions about employment that, he believed, betrayed a lack of understanding of the legal profession as a market.

As a professor, he began exploring the topic more academically in the mid-2000s. For a few years, a significant percentage of entry-level associates were getting very high salaries, while another chunk received much more modest starting salaries.

“I looked at it from kind of a labor market economist perspective and I said, ‘this is a broken market. Markets don’t clear this way,’” he told Indiana Lawyer. “People are either overpaying for some talent or underpaying for others, but this is not stable. I wanted to understand what was driving that difference.”

In his “Blueprint,” Henderson shares not only his analysis of the market, but a plan to begin to address some of the problems with valuation of legal services. His focus is primarily on law schools, but his plan will require cooperation from a variety of legal sectors in order to achieve success.

Law school viability is dependent on three factors, Henderson writes. Schools must have students willing to enroll, then a way to finance student education, and finally a market willing to employ graduates. Of these three, the last is the driving force. “Without jobs for its graduates, any law school enterprise will eventually fail. The students and financiers will wise up and abandon the school and its faculty,” Henderson writes.

While there is still a market for traditional legal services, Henderson argues that the market has been changing. The legal services market is being gradually replaced by those offering legal products and inputs which do not require the same input from “expensive, artisan-trained lawyers.”

He points to research by British lawyer Richard Susskind, who has identified a transition from traditional courtroom representation to commoditized legal services developed in conjunction with technology advances. “These changes are made possible by identifying recursive patterns in legal forms and judicial opinions, which enables the use of process and technology to routinize and scale very cheap and very high quality solutions to the myriad of legal needs,” Henderson writes.

There is growth in this sector, he notes, but much of the growth is happening overseas in places like India. Law schools in the U.S., by and large, have not begun training with these industries in mind.

While more research needs to be done, Henderson said it is important that law schools begin to develop mechanisms to be more responsive to changes in the market. He advocates three steps he believes will help law schools adjust: 1) form consortia with schools, alumni and employers to focus on labor market outcomes; 2) construct a competency-based curriculum that more accurately targets the needs of the legal marketplace; and 3) identify a small percentage of faculty and administrators (he says 12 percent) to spearhead reworking the system.

The idea is to quantify the skills the market is willing to pay for, then figure out how to teach those skills in a way that offers increased value. Henderson acknowledges that this plan is a work-in-progress, and he advocates building feedback loops into the system to allow for continuous evaluation and improvement of curricula.

Brian Tamanaha, professor at Washington University Law School in St. Louis and author of “Failing Law Schools” (2012), read Henderson’s proposal and thought it offers some strong insights and solid ideas for moving forward, although he noted a couple of reservations.

First, he said that identifying and teaching the competencies around which Henderson’s new curricula would be designed is a difficult proposition. “I’m not saying it can’t be done, but I am saying no one knows how to do it,” Tamanaha said.

A related question, though, is figuring out how much employers actually value these competencies. Tamanaha notes that large law firms now make offers before a student has finished the second year of school. He said he believes that it is possible law firms view schools as a sorting mechanism – a student who is smart enough to get in and do well the first year can handle the work. What students actually learn in terms of skills and competencies in school does not seem to play as big a role in hiring as the caliber of the school and the way the student performs in the first year.

Henderson’s theory is that if a school produces students with more competencies necessary for the marketplace, they will be more competitive and the school will benefit in the long run. “For him to be right requires that employers care about these things,” Tamanaha said. And maybe they will – he conceded that there is uncertainty that comes with any change of this magnitude.

Henderson also acknowledges that there will be some significant obstacles to putting a plan like this into place, not the least of which will be convincing traditionally minded faculty that the mode of legal education must shift to meet a changing marketplace.

He said his biggest worry is how well existing schools will rise to meet the challenge. “I can’t tell you how much I worry about that,” he said. “Now is the time when we need decisive leadership that figures out how to balance constituencies and makes hard decisions, and knows how to hold an institution together during rough times.”

Tamanaha agrees. “It is hard to change,” he said, noting that the kinds of competencies Henderson advocates teaching will require a different kind of person to teach them. Schools have for several decades been focusing on hiring scholars and academics who have little experience putting their legal skills to practice.

“If I were to start up a new school today, I wouldn’t hire what we’re hiring now, which is, people from elite law schools who get one-year clerkship and go into teaching,” Tamanaha said. “I would go in the direction of people who are smart and capable but experienced.”

Henderson said a number of law schools and faculty have expressed interest in his proposal. He and others have already taken steps toward forming the type of consortium he advocates, although he declined to name schools or individuals involved. Time will tell how well his proposals work on the ground, he said, but it is better to try something to address the shifting market than to ignore what is happening.

“Lawyers have a hard time believing that, yes, even law changes,” Henderson said. “We think that this is really extraordinary, but it is just part of history. There is nothing exceptional happening here. But it feels traumatic when it’s in your sector.”

Henderson’s paper, published in the Pepperdine Law Review, may be downloaded free of charge at http://ssrn.com/abstract=2202823.•